PHIL 270 Lecture 4: BE 1.25 (L) Rational Choice Theory
4 May 2018
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Department
Course
Professor
PHIL 270: Business Ethics
1.25 Lecture Notes
Economic students who have learned about behavior and stuff tend to act more self-interestedly to
guard against themselves rather than economics students tending to be more self-interested as
rational people
With altruistic punishment (aka moralistic aggression) added into the game, people will take a cost
upon themselves to make sure that fairness and justice is upheld
Not a result of reasoning (like yes, I’m punishing the defectors for the sake of fairness), but altruistic
punishment is more intuitive and out of this wired hatred
Haidt: in groups, a bunch of psychological profiles is good
o Someone who is super aggressive may be very function in certain context
o Might be okay to have a FEW free-riders, pacifists
o Women are better negotiators and men are better at enforcing contracts
Public good
o Prisoners’ dilemma arises in the absence of property rights
o If everyone takes 3 fish from the lake, everyone will be well-fed
o But if everyone takes 4 fish, everyone will be worse off (tragedy of the commons)
o Each person is individual better off to not constrain their own actions, but the aggregate result
is everyone is worse off
o Social norms + social punishment (public spectacles using torture as a mechanism that enforce
conformity), governmental regulations ways to move from the Nash equilibrium to the
Pareto optimum
o Public goods problem, prisoners’ dilemma, tragedy of the commons
Ultimatum game: allocator, receiver
o Economics students, on average, offer much less than other students
o Evidence against the idea that people are single-minded profit maximizers since most people
reject highly one-sided offers
o Fairness norms differ across societies – have a lot to do with whether the society is gift-giving,
tipping, etc.
o Framing effects – could be that the people in the game are thinking about it differently – trying
to push it to the limit for fun
Objective prisoners’ dilemma – objective outcomes (prison sentence), not subjective preferences
o With such a dilemma, a lot of people don’t defect – cooperative prisoners’ dilemma
o Self-description of what people are trying to do
o If economic students don’t know what fairness is or whether fairness exists in the world, then
economic students seem to have a problem
o True that with iterated prisoners’ dilemma, cooperation rates go up, but the rate increases at a
lower rate for economic students than for others
o Objective payoffs don’t capture the subjective preferences such as probabilistic reputational
effects
With added element of communication – works with relatively small groups and small payoffs
o When oxytocin goes up, trust goes up ONLY for the in-group, and indignation and hatred goes
up for the out-group
Back to the economics students…
o The homo economicus model is false and pernicious
o If we internalize a model that decreases the likelihood to act on fairness norms, that will have
bad effects, just measuring material gains
Document Summary
Economic students who have learned about behavior and stuff tend to act more self-interestedly to guard against themselves rather than economics students tending to be more self-interested as rational people. With altruistic punishment (aka moralistic aggression) added into the game, people will take a cost upon themselves to make sure that fairness and justice is upheld. Not a result of reasoning (like yes, i"m punishing the defectors for the sake of fairness), but altruistic punishment is more intuitive and out of this wired hatred. Pareto optimum: public goods problem, prisoners" dilemma, tragedy of the commons. Objective prisoners" dilemma objective outcomes (prison sentence), not subjective preferences: with such a dilemma, a lot of people don"t defect cooperative prisoners" dilemma, self-description of what people are trying to do. With added element of communication works with relatively small groups and small payoffs: when oxytocin goes up, trust goes up only for the in-group, and indignation and hatred goes up for the out-group.
